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Here's everything you need to know about Fed Chairman Jerome Powell's comments on Monetary Policy
Jerome Powell, Chairman of the Federal Reserve, held a press conference on January 27 to provide updates after a monetary policy meeting.
The meeting, on Wednesday, started at 2:30 pm and was wrapped up by 3:25 pm. Powell said that Federal Reserve is committed to achieving monetary policy goals to ensure price stability and maximum employment. Federal Reserve is taking forceful actions to provide stability since the start of the Covid-19 Pandemic, he added. He kept the interest rates near zero, and he also discussed the bond-buying program of the Central bank.
In the press briefing, he squashed the speculations that Fed can taper the bond purchases. He considered that tapering is entirely premature, and Federal Reserve would improve the goals before considering taper the purchases. Talking about inflation, he added that there was a significant impact of the Pandemic on inflation. Prices remain soft for the most affected sectors; while there was a large decline during the spring, prices are picked up over the summer. According to him, inflation was below 2% longer-run objective in one year. He was determined to maintain the stance of monetary policy until the achievement of inflation and employment outcomes.
Besides, Federal Reserve is trying to increase the Treasury securities holdings by $80 billion per month & mortgage-backed securities by $40 billion per month to achieve price stability and maximum employment.
When asked about speculative stock trading, Powell mentioned that monetary policy was not the main factor for frothy trading. According to him, the driving of the asset prices could be due to fiscal policy and expectations about vaccines, not monetary policy. People don't consider the connection between asset values and interest rates, he believes. He was looking to avoid the question on Gamestop. When asked about the rise and short squeeze in GameStop shares, he said he could not just comment on a particular company.
Investors were expecting the Federal Reserve to acknowledge some weakening of the economy and to keep the interest rates low for a very long time. Still, there were bare minimum changes in the 10-year Treasury yield. It can be concluded that some of their strategies could lower the bond yield due to the rise in prices. Federal Reserve has made the strategies to restore the market functions that were halted due to the Pandemic, and then it will try to avoid the long-run damage to the economy. The January meeting was more focused on maximizing employment and financial stability. The Central bank is ready to provide all sort of support to the investors as long as necessary.